Arizona State Tax Comm'n v. Garrett Corp
In Arizona State Tax Comm'n v. Garrett Corp., 79 Ariz. 389, 291 P.2d 208 (1955), the taxpayer was a seller of goods to the United States Government.
The seller contended that the "added charge" language in the predecessor to A.R.S. section 42-5002(A)(1) changed the character of Arizona's transaction privilege tax to that of a true "sales tax," and therefore invalidly imposed a direct tax on the United States Government.
The Arizona Supreme Court disagreed and held that the amendment did not shift the legal incidence of the tax from seller to buyer, in effect reversing judgment for the taxpayer. Id. at 393, 291 P.2d at 210-11.
The Garrett court was not concerned with whether the activity for which taxes were collected and remitted was outside the taxing statute entirely.
The assumption underlying the court's discussion was that the tax in question applied, but the taxpayer passed through to its customer an amount greater than the tax it actually owed on the transaction. See id. ("The seller is prevented from profiting at the expense of the purchaser under the guise of a compulsory tax.").
In that context, Garrett's statement that an amount the seller charges for tax in excess of the statutory percentage "is the amount of the tax" meant only that the taxpayer could not keep the excess, but rather had to remit it along with the amount that the statutory tax rate would have yielded.